A recent survey by Central Bank has revealed a growing business confidence from domestic oriented business as opposed to exporters, sparking fresh concerns that global economic recovery might take longer that previously thought.
A summary review of the annual Business Expectations Survey (BES) for September 2010 showed that the overall confidence in the prevailing business conditions for the year is 56 percent.
This is 2 percentage points improvement over 54 percent for the corresponding period or the first quarter of the year, the Central Bank, headed by Linah Mohohlo, stated.
The Bank added that notably, the increasing optimism throughout the survey period is driven by domestic-oriented businesses.
In contrast, among those that are focused on export markets only 40 percent are positive about current business conditions, although this does improve during 2011, rising to 60 percent.
“This marks a sharp reversal from the previous survey where the recovery in confidence was most pronounced among exporters and could reflect renewed concerns about the strength of the global recovery as well as the real appreciation of the Pula against currencies in which most major exports are denominated,” Bank of Botswana said.
“At the same time, the confidence of domestic suppliers has been boosted by the Government’s increased commitment to local procurement,” the Bank added.
Government last year announced its resolve to limit imports by supporting domestic producers in a new skewed procurement regime. Under the Economic Diversification drive, government wants local business to have a sizeable share of stake on its P20 billion purchasing power, which is being enjoyed by foreign companies.
Meanwhile, past data had showed that recovery in the global economy has been maintained, although during the survey period there were increasing concerns about growth prospects in some developed economies.
They argued that the impact of previous fiscal stimuli was fading away and debt sustainability among economies in the periphery of the euro zone has become a focus of attention.
The World Bank October forecast for world GDP growth was 4.8 percent in 2010 and 4.2 percent in 2011, while inflation is expected to remain subdued.
The forecast was even better on the domestic front with the positive outlook, as indicated by the government’s most recent forecast for GDP growth in 2010 of 7.9 percent.
“This reflects the continued recovery of the mining sector, as well as additional investment in the power and water sectors,” the summary stated.
Despite improving levels of confidence, businesses are somewhat pessimistic about the overall performance of the economy. Average expectations of GDP growth of 1.9 percent in 2010 and 2.9 percent in 2011 have fallen since the March survey (when the equivalent figures were 2.7 percent 3.3 percent, respectively).
From this, it seems the businesses remain very cautious in the wake of the recent recession (the average expectation is weighed down by some extremely pessimistic responses).
“It should, however, be noted that such expectations are at odds with other publicly available information (GDP estimates for the first half of 2010 were available at the time of the survey, for example),” stated the survey summary.
“In turn, this may suggest that such information, although available, is not disseminated effectively enough to the local business community.”
The BES survey found out that going ahead there is a significant increase in confidence over the rest of the survey period with 67 percent of businesses expecting that conditions will be more favourable in the first half of 2011 and 73 percent for the 2011 as a whole.